Daily Archives: August 6, 2010

Ben Bernanke may have a few sleepless nights over the weekend as he prepares for Tuesday’s crunch meeting of the Federal Open Market Committee. Clearly, today’s jobs figures will have given him cause for concern. Private sector job creation is anaemic – well below what it takes to keep up with population growth – and well below its pace in March and April. Could the labour market recovery have peaked just after it started ?

Looking to Tuesday, there is no doubt that the pressure is on for the FOMC to begin mapping out a strategy to deal with the “unusual uncertainty” in the US economy that was cited in Mr Bernanke’s congressional testimony last month. But no one is expecting the Fed to begin easing aggressively next week to jolt the sluggish recovery. After all, at its latest meeting, the FOMC set a high bar for easing : economic conditions would have to “worsen appreciably” – which they haven’t even considering today’s figures. Read more

This is the ECB’s opinion on short-selling, which contains a slight rap over the knuckles for Germany:

While it may be necessary to impose short selling restrictions in times of financial crises, they should be introduced in a coordinated manner and removed again as soon as normal market conditions are re-established Read more

Today, in the last post before I go on holiday, I want to spend some time looking at a more fundamental issue for next week’s inflation report: the forecasts themselves. We will have another go at this in the Financial Times next week and comments in advance are really welcome, but here are some very interesting preliminary results. Quick summary – the Bank’s forecasts are not very good. In fact they are shocking. And this matters because the Bank tells us that the forecasts form the basis for UK monetary policy.

Every August, the Bank does its own evaluation of its forecasting record and always pats itself on the back. This tiresome tradition arises since the Bank gives the forecasts extremely easy tests to pass. It compares its central forecasts with its own subjective range of uncertainty. Here are some other very basic tests of forecast accuracy, which do not give such an encouraging result to the Bank’s vast teams of economists and forecasters.

Persistent optimistic bias

If you look at the chart, the Bank’s central forecast for growth (mode market rate) is, on average, too pessimistic by 0.2 percentage points in the quarter it is forecasting and it gets more erroneously optimistic as the Monetary Policy Committee peers further into the distance. Read more

Are economics bloggers a more gloomy bunch, or do they just lack the political constraints that force the smiles of policymakers?

Below is a word cloud of bloggers’ responses to the question: “How do you rate the assess the overall condition of the US economy right now?” posed in a quarterly survey by the Kauffman Foundation. The words ‘good’, ‘promising’ and ‘dynamic’ are present, but they are roughly the same size as ‘encrusted’ and ‘moribund’ – not, one imagines, popular choices in a free text field.

A baby born today in Italy will be supporting almost twice the elderly population of a baby born in the UK by 2050. (Assuming that child doesn’t realise the problem, and emigrate.)

With all the perspective that 10,000 miles provides, the Reserve Bank of Australia has given a summary of conditions in Europe as part of its quarterly monetary review.

A fiscal tightening comparison is instructive: the tightening is inversely proportional to the size of the economy, with France and Germany only forecast to tighten by 0.5 per cent each by the end of next year. Read more

Peru’s central bank has raised its benchmark rate a more-than-expected 50bp to 2.5 per cent, to counter rising inflationary pressures. The economy grew 9.2 per cent in the year to May and is forecast to rise a “spectacular” 10 per cent in the year to June, central bank chief Julio Velarde said a couple of weeks ago. Peru was the second South American country to begin raising rates, after Brazil. Since then, Chile has also increased rates.

The Money Supply team

Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

Claire Jones is the FT's Eurozone economy correspondent, based in Frankfurt. Prior to this, she was an economics reporter in London. Before joining the Financial Times, she was the editor of the Central Banking journal. Claire studied philosophy and economics at the London School of Economics. RSS

Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

Sarah O’Connor is the FT’s economics correspondent in London. Before that, she was a Lex writer, covered the US economy from Washington and the Icelandic banking collapse from Reykjavik. Sarah studied Social and Political Sciences at Cambridge University and joined the FT in 2007. RSS

Ferdinando Giugliano is the FT's global economy news editor, based in London. Ferdinando holds a doctorate in economics from Oxford University, where he was also a lecturer, and has worked as a consultant for the Bank of Italy, the Economist Intelligence Unit and Oxera. He joined the FT in 2011 as a leader writer. RSS

Emily Cadman is an economics reporter at the FT, based in London. Prior to this, she worked as a data journalist and was head of interactive news at the Financial Times. She joined the FT in 2010, after working as a web editor at a variety of news organisations.
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Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS

Ben McLannahan covers markets and economics for the FT from Tokyo, and before that he wrote Lex notes from London and Hong Kong. He studied English at Cambridge University and joined the FT in 2007, after stints at the Economist Group and Institutional Investor. RSS